[Comprehensive Report 2] "Putin Chose War" US Imposes Additional Sanctions... Controls on Russian Exports

[Image source=EPA Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] "Russian President Vladimir Putin has chosen war. Now he and his country must bear the consequences."

On the 24th (local time), the U.S. Biden administration unveiled a stronger sanctions card targeting Russia, which launched an invasion of Ukraine, including advanced technology export controls. The previously discussed powerful measures such as exclusion from the international financial messaging system (SWIFT) and direct sanctions on President Putin were not included this time. However, President Biden also indicated that such sanctions remain on the table.

◆ "Putin is the aggressor" - Examining additional U.S. sanctions

In an address to the nation at the White House that afternoon, President Biden announced additional sanctions against Russia, stating, "President Putin's choice will make Russia weaker and the rest of the world stronger." The sanctions focus on major Russian financial institutions holding assets totaling $1 trillion (approximately 1,204 trillion KRW), export controls that could directly damage the advanced technology industry, and sanctions on Putin's close associates.

With these sanctions, over 90 financial institutions, including Russia's largest banks Sberbank and VTB, will be unable to conduct transactions through the U.S. financial system. According to the Treasury Department, Russian financial institutions conduct global foreign exchange transactions averaging $46 billion (about 55.4 trillion KRW) daily, 80% of which are in U.S. dollars. However, most of these transactions will become impossible due to the sanctions.

Export controls targeting Russia's defense and aerospace industries are designed to block Russia's access to advanced technology. Key items include semiconductors, computers, communications, lasers, and sensors.

President Biden emphasized that these sanctions are not unilateral but involve 27 European Union (EU) member states and the Group of Seven (G7) countries. He stated, "They will impose immediate and long-term severe costs on the Russian economy," and added, "We have minimized the impact on the U.S. and our allies."

On the 24th (local time), when Russia launched its invasion of Ukraine, flames and smoke rose from the Border Guard duty facility in the Kyiv area, the capital of Ukraine, which was destroyed by shelling. 2022.2.24 [Image source=Yonhap News]

However, the sanctions announced that day did not include the powerful measure of excluding Russia from the SWIFT international financial messaging system, which is considered a strong card to effectively cut Russia off from the global financial network. President Biden confirmed in response to related questions that SWIFT was not included. SWIFT is a system that allows financial institutions worldwide to conduct international financial transactions using 8- or 11-character codes. Additionally, President Biden hinted that direct sanctions on President Putin remain "on the table" and are still under consideration.

Plans for talks with President Putin were firmly rejected. Biden, who called Putin an "aggressor," drew a clear line, saying, "I have no plans to talk with him." He assessed that Putin "has ambitions far greater than Ukraine" and "wants to rebuild the Soviet Union."

Regarding the deployment of U.S. troops to Europe, Biden clarified that it is not to fight Russian forces within Ukraine but to defend NATO allies. When asked whether he is urging China, which maintains close relations with Russia, to help isolate Putin, he replied, "I am not prepared to comment on that at this time."

◆ Western division over key SWIFT issue, energy sector untouched

The additional sanctions announced by President Biden that day fell short of the "massive sanctions package" he had previewed on Twitter just before his speech. Despite the invasion already underway, the exclusion of Russia from SWIFT, which would deal the greatest blow to the Russian economy, was not included. This was due to opposition from Germany, the Netherlands, Italy, and others, despite demands from hardliners including UK Prime Minister Boris Johnson.

If excluded from SWIFT, which is used by over 11,000 major banks and financial companies worldwide, Russia would effectively be cut off from the international financial network. German Chancellor Olaf Scholz and others opposed this measure as a "last resort," but underlying this opposition are complex national interests. A senior EU diplomat said, "Economic interests are winning the debate." The closer the economic ties with Russia within Europe, the harder it is to choose this card.

Immediately after the address, questions flooded in from the field such as, "SWIFT was not mentioned in the sanctions. Is there disagreement among the allies?" and "So far, sanctions have clearly been insufficient to stop President Putin." President Biden responded to SWIFT-related questions by saying, "Some European countries do not want it at this time." However, he added, "It is always an option."

As President Biden must unify the opinions of various countries, he cannot ignore the repercussions of excluding Russia from SWIFT. Russia is the world's 12th largest economy. Western companies doing business with Russia will inevitably be affected. Western banks also face the risk of not being able to recover loans extended to Russia.

Moreover, the more the U.S. uses sanctions, the more China could become a beneficiary, which adds to President Biden's concerns. Eswar Prasad, a trade policy professor at Cornell University, evaluated, "All financial sanctions will promote trade between China, the world's second-largest economy, and Russia, and weaken the dollar-centered global financial system."

On the 24th, when Russia launched a full-scale invasion of Ukraine (local time), soldiers in Kharkiv, northeastern Ukraine, were inspecting a destroyed armored vehicle. The Ukrainian military claimed that this armored vehicle belonged to the Russian forces and was destroyed during the engagement. 2022.2.25 [Image source=Yonhap News]

President Biden also refrained from touching the energy sector that day. A U.S. government official explained, "There is no choice. If we sanction the energy sector, it would actually benefit Russia in terms of prices (due to a surge in oil prices)." Direct sanctions on President Putin were also not included. The Wall Street Journal (WSJ) reported that such sanctions are being reserved as a response for the next phase, such as Russia's occupation of Kyiv. Ultimately, for President Putin, the cards and their order that President Biden plays are inevitably predictable.

Furthermore, the fact that the invasion of Ukraine materialized despite extensive diplomatic efforts has put President Biden on the defensive. When asked whether he underestimated President Putin, Biden replied, "I did not underestimate him." While stating that all options remain on the table, he did not answer repeated questions about why Putin was not sanctioned today.

◆ Following the U.S., major countries join 'export controls'... Impact on South Korea

Following the U.S., the EU, Japan, Canada, and others have announced their intention to join export controls targeting Russia. The EU announced that it would exclude Russia's access to key technologies such as semiconductors and advanced software. The Moon Jae-in administration also plans to participate in the international community's sanctions against Russia.

However, the so-called "Huawei-style sanctions" export controls include items produced by domestic companies such as semiconductors and computers, so South Korea will inevitably be affected.

South Korea's exports to Russia amounted to $9.983 billion (approximately 12.0255 trillion KRW) last year, about 1.6% of total exports. Among these, automobiles and parts account for 40.6% of the total, around 5 trillion KRW, raising concerns about significant damage to the finished car industry due to export restrictions. During the 2014 sanctions against Russia, South Korea's exports of passenger cars and auto parts dropped sharply by 62.1% and 39.6%, respectively, and it took considerable time to recover sales. Although Russia's share in semiconductors is only 0.06%, damage is expected since semiconductor chips are included in virtually all finished products such as vehicles, smartphones, and home appliances.

If the U.S. and major countries, which have warned of phased sanctions, increase the level of economic sanctions against Russia in the future, the damage to domestic companies doing business and exporting locally will inevitably grow.

Meanwhile, Russian forces invading Ukraine are currently advancing near the capital Kyiv. According to the U.S. Department of Defense, Russia fired more than 160 missiles, including medium-range and cruise missiles, that day. Due to Russia's simultaneous attacks the previous day, many military facilities in Ukraine were destroyed, and about 220 Ukrainians were reported killed or injured.

This content was produced with the assistance of AI translation services.